FTC to sue PBMs over drug prices including insulin

The Federal Trade Commission is planning to sue three large U.S. health corporations over their practices as middlemen who negotiate prices for medications comparable to insulin, because the agency argues they inflate costs for patients, a source aware of the matter told CNBC on Wednesday.

The suits are expected to focus on the three biggest so-called pharmacy profit managers, UnitedHealth Group‘s Optum Rx, CVS Health‘s Caremark and Cigna‘s Express Scripts, the source said, confirming an earlier Wall Street Journal report on Wednesday in regards to the agency’s plans. All three are owned by or connected to health insurers. 

The lawsuits will specifically deal with the business practices related to the rebates PBMs broker with drug manufacturers, the Journal reported, citing sources aware of the matter. 

A CVS Caremark spokesperson said in an announcement Wednesday that the corporate is “happy with the work now we have done to make insulin cheaper for all Americans with diabetes, and we stand by our record of protecting American businesses, unions, and patients from rising prescription drug prices.”

An Express Scripts spokesperson said “the costs of insulin and other medicines are set by their manufacturers, who’ve raised list prices repeatedly.”  Express Scripts works to “combat the pharmaceutical industry’s high prices and lower the fee of hundreds of medicines for patients and their health plans, and the information shows that we succeed,” they added.

The FTC declined to comment on the reported lawsuits. A spokesperson for Optum Rx didn’t immediately reply to a request for comment. 

The FTC’s investigation into insulin prices also examines drugmakers, nevertheless it is unclear whether or not they shall be named within the upcoming lawsuits, Politico reported, citing sources. Eli Lilly, French drugmaker Sanofi and Danish pharmaceutical company Novo Nordisk control roughly 90% of the U.S. insulin market.

PBMs sit at the middle of the drug supply chain within the U.S. They negotiate rebates with drug manufacturers on behalf of insurers, large employers and others. In addition they create lists of medicines – or formularies – which are covered by insurance and reimburse pharmacies for prescriptions. 

The FTC on Tuesday released a scathing interim report based on its ongoing multi-year investigation into PBMs. The report slammed the three largest PBMs for manipulating the drug supply chain to counterpoint themselves on the expensive of smaller, independent pharmacies and U.S. patients. 

Six of the biggest PBMs handled nearly 95% of the prescriptions filled within the U.S., the FTC’s report said. Its investigation began in 2022.

PBMs contend that manufacturers are chargeable for high drug prices, while drugmakers say rebates and costs collected by those middlemen force them to extend list prices for products.

The Biden administration and Congress have ramped up pressure on PBMs, looking for to extend transparency into their operations as many Americans struggle to afford prescribed drugs. On average, Americans pay two to 3 times greater than patients in other developed nations for prescribed drugs, based on a factsheet from the White House.

President Joe Biden’s signature Inflation Reduction Act has capped insulin prices for Medicare beneficiaries at $35 monthly. That policy currently doesn’t extend to patients with private insurance.